Delivery readiness: Can orders also be handed over within the delivery time?
Consumers as well as commercial customers are used to always being able to choose from an abundance of products. Only to a small extent are longer delivery times common, and a large proportion is mostly available immediately. But the processes that run in the background to maintain delivery readiness are extremely complex. After all, they say something not only about the supplier rating, but also about the company's ability to adequately serve demand.
Definition of readiness to deliver: What does this mean in concrete terms?
When selecting suitable suppliers, it is not only price levels, product specifications or the like that matter - the company's ability to complete specific orders within a fixed period of time is also considered a success factor. A high readiness to deliver thus expresses the reliability of the supplier; it forms a central key figure in logistics. A low level of readiness to deliver means certain risks that affect the company-supplier relationship as well as the company-customer relationship in equal measure.
Example: A retail company orders a popular article exclusively from supplier A. Customer demand for this product is constantly increasing, and delivery intervals are correspondingly close. If the supplier is able to deliver the exact quantity in the desired quality on the notified date, this would correspond to a delivery readiness level of 100 percent. However, since this also entails high storage capacities, which tie up capital, lower values are often considered the optimum benchmark in many industries.
Calculation of delivery readiness: This formula provides information about the degree of delivery readiness
High-performance logistics not only secures the company's market position, but at the same time enables it to adapt dynamically to changes in demand. In times of e-commerce and a profound digitalization of individual business processes, customer expectations are also rising. This means that fast, prompt delivery is thus also an important contribution to high customer satisfaction.
In order to achieve this, the aim is to achieve a high degree of delivery readiness. Different calculation formulas are available, which are more suitable depending on the operation. We present the most important formulas for calculating delivery readiness below.
- Delivery readiness level I (in percent) = number of completed order items / total number of order items x 100
- Delivery readiness level II (in percent) = value of completed orders within a period / total value of orders in corresponding period x 100
- Delivery readiness level III (in percent) = number of items delivered on time and in the correct quantity / total number of orders within a period x 100
Important: A look at the individual degree of readiness to deliver (LBG) provides information on the extent to which delivery backlogs exist or existed in the past. However, the ideal of 100 percent delivery readiness would at the same time trigger a conflict of objectives, because it would result in high storage and inventory costs at the same time. Therefore, individual consideration is always necessary in order to prioritize certain products or product groups (according to margin, order value, or similar) and to define different target values for delivery readiness.
Advantages of a high delivery readiness
Every company must be measured against standards within its own industry that indicate whether it has a high, low or average delivery performance. Especially in the mail order business, fast, appropriate deliveries are an elementary part of the business model. A delivery readiness level of 99 percent (target figure) is therefore usually set. In other segments, such as B2B, differentiation can be made on the basis of other factors.
The main advantages associated with a high level of delivery:
- Competitive advantage due to high number of items available for immediate delivery
- Publicly perceivable higher service level
- Visible sign of efficient warehouse and logistics structures
To note: Inefficient warehousing is closely related to low delivery readiness, which is multifactorial with shortage costs, follow-up costs and other aspects.
Strategies to increase the readiness for delivery in the warehouse
In order to reduce costs and at the same time increase the competitiveness of the company, it is necessary to increase the readiness to deliver. The decisive factor here is the degree of "optimum delivery readiness", which is not necessarily 100 or 99 percent. Particularly important, central products of the company, which represent the basic assortment, should have a higher degree of readiness for delivery than secondary or niche products.
The following steps are useful to increase delivery readiness:
- Putting shortage costs and inventory costs in relation to each other
In the context of production, materials are required at a specific date in the respective quantity. If this is lacking, alternatives are necessary, which come with higher costs. An analysis of the relationship between the two KPIs is the basis for defining the so-called minimum stock - equivalent to the safety stock or iron stock.
- Use warehouse management software for optimal inventory management
Digitized management and control of warehouse capacities enables a differentiated view of processes along the logistics chain.
You can find more articles about intralogistics, warehouse management system and warehouse management software in the logistics lexicon of proLogistik. It's worth taking a look!
